Investors rattled by Deutsche Bank and HSBC

By John O'Donnell

FRANKFURT (Reuters) - A profit warning from Deutsche Bank and a prediction HSBC Holdings may need fresh capital shook confidence in two European banks previously credited with dodging the worst of the crisis.

Shares in Deutsche Bank and HSBC both tumbled by about 8 percent on Wednesday, helping drag down the European sector as a whole .SX7P which was down around 6 percent.

Deutsche Bank (DBKGn.DE) surprised shareholders with news it had racked up a loss of more than $6 billion (4.1 billion pounds) in the final three months of last year.

Meanwhile analysts at Morgan Stanley predicted HSBC (HSBA.L) (HSBA.L) may need to raise up to $30 billion in a rights issue.

The Deutsche Bank profit warning is a fresh sign that clouds continue to darken over Europe's banks after the storm which started with risky American loans toppled many of Wall Street's top names.

The crisis has forced top U.S. bank Citigroup (C.N) into talks with Morgan Stanley to merge their broking arms.

Deutsche Bank's rivals UBS (UBSN.VX) and Credit Suisse (CSGN.VX) have already warned of heavy losses in the final three months of last year.

Deutsche Bank, although predominantly an investment bank, had been seen as a relatively safe bet after managers gave repeated reassurances as the crisis unfolded.